ACCT 330 – TEST 2
CHAPTER 6 – DEDUCTIONS AND LOSSES
Criteria for deducting business and investment expenses – must be… * Related to a profit-motivated activity of the taxpayer
* Ordinary, necessary, and reasonable in amount
* Properly documented
* An expense of the taxpayer
Expenditure is not deductable if it is…
* A capital expenditure
* Expense related to tax-exempt income
* Illegal or in violation of public policy, or
* Specifically disallowed by tax law
Business or investment activity? – requirements have two parts * Activity must be engaged in for profit * Trade or business vs. investment classification – distinction important only to individuals * Expenses incurred in a trade or business are deductions for AGI * Investment expenses, other than those incurred to produce rents and royalties are deductions from AGI Legal and accounting fees – may deduct if incurred in conduct of trade or business or for the production of income * Deductions for AGI if incurred in trade or business and any fees incurred in the determination or collection of taxes * All other legal and acct fees incurred by taxpayer are from AGI * Cannot deduct legal fees incurred in the acquisition of property (these are capitalized) Ordinary expense – reasonable in amount, bears reasonable and proximate relationship to the income-producing activity or property * Does not mean the property must be producing income currently Necessary expense – appropriate and helpful in the taxpayer’s business Reasonable – compensation does not exceed the value of work put in Expenses and losses incurred directly by the taxpayer – taxpayers may not take a deduction for a loss or expense of another person * In order for a business to deduct personal employee expenses one of two things must happen… * The employee must report additional compensation, or * The employee must reimburse the company for the compensation received * Exception: medical expenses paid on behalf of a dependent Capitalization vs. Expense deduction

General capitalization requirements – taxpayer may not take current deduction for capital expenditures Capital expenditures – expenses that add to the value of, substantially prolong the useful life of, or change the use of the property Depreciable/amortizable assets – buildings, machinery, equipment, furniture, purchased goodwill Non depreciable/amortizable assets – land, stock, partnership interests Maintenance/repair expenditures – deductable only if they do not increase the value or prolong the useful life of the asset Expenses related to tax exempt income - may not deduct any expense allocated or related to tax-exempt income * Purpose – to prevent taxpayer from receiving a double tax benefit * Also disallows interest expense on debt the taxpayer incurs in order to purchase or hold tax-exempt securities * Depends on intent of the loan, intent determined w/tax-exempt securities if the securities themselves are used as collateral to secure the loan Expenditures contrary to public policy – not deductable If payment itself is illegal or if it is a penalty or fine from an illegal act * Bribes and kickbacks – applies to pmts made to federal officials, state, local, and foreign governments, and officials of an agency of government. * Fines and penalties – deductions not allowed

* Expenses related to illegal activity – deductable if they are ordinary, necessary, and reasonable and the taxpayer reports the income from the illegal activity * However, disallows any illegal business of trafficking or drug dealing Political Contributions and lobbying expenses – may not deduct if made in connection w/the following… * Influencing legislation

* Participating or intervening in a political campaign
* Attempting to influence the general public w/respect to election matters * Communicating directly w/the president, vice president, or other federal...

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Taxation of U.S. Non-Resident Aliens and Foreign Corporations
Baker College of Muskegon
Elizabeth Lamas
Taxation of U.S. Non Resident Aliens and Foreign Corporations
Throughout this quarter we have learned how different entities are taxed, but we have not learned how foreign corporations and nonresident aliens are taxed. The purpose of this research paper is to discuss the basic concepts of how these two entities are taxed in the United States.
A foreign corporation is any corporation that is “not organize under the laws of the United States, any states, or the District of Columbia” (United States international tax site: foreign corporation, 2012). The United States has jurisdiction to tax foreign corporations, but only if they are engage in business in the United States or receives income from sources within the United States. There are two circumstances where foreign corporations are subject to U.S. income tax. The first circumstance is net income effectively connected with a U.S. trade or business is taxed at a normal corporate income tax rate (United States international tax site: foreign corporation, 2012). The second circumstance is that any U.S. source income not effectively connected with a U.S. trade or business is taxed at a 30% rate. If a foreign corporation is unsure if income is effectively connected with a U.S. trade or business, they can refer to tax code 91 RC section 864 (c) which contains the rules in...

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BSBA – Marketing III
February 15, 2014
Law in Income Taxation
Mrs. Gosom
Business Income Tax –
A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public.
Resident Citizen –
A citizen of his country who has a permanent home or place of abode in his country to which he/she intends to return whenever he/she is absent for business or any vacation.
Resident Alien –
A person who is not a citizen of the Philippines but whose residence is within the Philippines.
Non-resident Alien –
A non-resident alien engaged in trade or business is one who stays in the Philippines for more than 180 days during the calendar year. The taxable income of non-resident alien engaged in trade or business is their gross income. Another definition is, An individual who is not a citizen of the Philippines and whose residence is not within the Philippines.
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...TAXATION LAW
I. General Principles
POWER OF TAXATIONTAXATION – power by which the sovereign through its law-making body raises revenue to defray the necessary expenses of government from among those who in some measure are privileged to enjoy its benefits and must bear its burdens.
Two Fold Nature of the Power of Taxation
1. It is an inherent attribute of sovereignty
2. It is legislative in character
Extent of Taxing Power
Subject to constitutional and inherent restrictions, the power of taxation is regarded as comprehensive, unlimited, plenary and supreme.
Scope of Legislative Taxing Power
1. Amount or rate of tax
2. Apportionment of the tax
3. Kind of tax
4. Method of collection
5. Purpose/s of its levy, provided it is for public purpose
6. Subject to be taxed, provided it is within its jurisdiction
7. Situs of taxation
TAXES – enforced proportional contributions from the persons and property levied by the law-making body of the State by virtue of its sovereignty in support of government and for public needs.
Characteristics of Taxes
1. forced charge;
2. pecuniary burden payable in money;
3. levied by the legislature;
4. assessed with some reasonable rule of apportionment; (see theoretical justice)
5. imposed by the State within its jurisdiction;
6. levied for a public purpose.
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Finance University under the Government of the Russian Federation
International Finance Faculty
"Taxation"
Essay on the topic:
“Explanation of a tax principle that every taxpayer has to contribute to the state income to the same extent”
Made by:
Belousova A., Karlova M.,
Omarov A., Konotopov. M.
IFF 3-2
Moscow
2014
Due to the tax principle that every taxpayer has to contribute to the state income to the same extent, we can consider that there are several interpretations of this idea.
First of all, it can be understood as a “flat tax”, and what does that mean?
A long-standing debate on the fairest method of applying federal income tax has surrounded the question of a flat tax. So it is a percentage charge applied equally to everyone, regardless of their income level, investments, or other financial characteristics. In other words a flat tax is a single rate that just simply spans all income brackets of taxpayers, rather than the “progressive” system, which taxes higher-income individuals at increased rates and includes numerous deductions and exemptions.
On one hand, we suggest that a simplified flat tax on income would not mainly be fairer but save the government a considerable amount of money in bureaucratic fees. As it is, the Internal Revenue Service spends a lot of time and money investigating the proper filing of taxes, including exemptions or "write offs", in case of progressive tax system. Coincidentally, this proposed...

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Topic: Advantages Of Direct Taxes
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Impacts Of Indirect Taxes on
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By:
Vrushika Sheth
Introduction on Tax
To tax (from the Latin taxo; "I estimate") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour).
A tax is a "pecuniary burden laid upon individuals or property owners to support the government. A payment exacted by legislative authority." A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government whether under the name of toll, tribute, tall age, gable, impost, duty, custom, excise, subsidy, aid, supply, or other name."
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Under the other three methods, the TP is not required to keep a log book. If the one-third of total car expense method is used the TP must have written evidence of expense incurred and/or odometer records to substantiate an estimate of expenditure on fuel and oil (s 900-70).
No substantiation is required where the TP uses the 12% of original value method or the cents per kilometre method.
Base on Taxation Ruling TR 97/23, such as oiling, brushing or cleaning items otherwise in good working condition to prevent the possibility of future deterioration would not constitution repair. Therefore, the expenditure cannot be deductible. In this case, the expenditure of car washes is not allowed to deduct.
Entertainment expenses: s 32-5: entertainment outgoings incurred after 19/9/1985 are not tax deductible. S 32-20: an outgoing incurred by the TP for the purpose of promoting or advertising, to the public, goods or services provided by a business carried by the TP, or were incurred in providing a FB (like meals in the executive dining room) is deductible. If the trip is less than 6 nights and for business purposes solely,...

...CORPORATE TAXATION (A.Y. 2011-12)
-:INCOME TAX:-
1. Definition:
PERSONS: - According to Section 2(31) of the Income Tax Act, 1961, Person includes: a) An individual; (b) a Hindu Undivided family; (c) a Company; (d) a Firm; (e) an Association of persons or a body of individuals, whether incorporated or not; (f) a Local Authority; (g) every artificial juridical person not falling within any of the preceding categories.
ASSESSEE: - Assessee means a person by whom income tax or any other sum of money is payable under the Act. [Sec.- 2(7).]
INCOME: - Income is a periodically monetary return with some sort of regularity. It may be recurring in nature. It may be broadly defined as the true increase in the amount of wealth, which comes to a person during a fixed period of time. [Sec. - 2(24).]
ASSESSMENT YEAR: - Assessment Year means the period starting from April 1 of a year and ending on March 31 of the next year. [Sec. 2(9)]
PREVIOUS YEAR: - Income earned in a year is taxable in the next year. The year in which income is earned is known as previous year. [Sec.-3]
GROSS TOTAL INCOME: - As per sec.-14, the aggregate income under the five heads (Salaries, Income from House property, Income from Business or Profession, Income from Capital Gain, Income from other sources) is termed as “Gross Total Income”.
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